Financial Attention and the Disposition Effect

61 Pages Posted: 15 Mar 2018 Last revised: 9 Dec 2019

See all articles by Nicolas Dierick

Nicolas Dierick

Ghent University - Department of Economics

Dries Heyman

Ghent University - Department of Financial Economics

Koen Inghelbrecht

Ghent University - Department of Economics

Hannes Stieperaere

Ghent University - Department of Financial Economics

Date Written: April 16, 2019

Abstract

Using a novel brokerage dataset covering individual investors' login and stock trading behavior, we investigate the severity of the disposition effect as a function of attention. Our results show that more attentive investors trade less in line with the disposition effect, suggesting a comparative advantage in incorporating information into financial decision making. Furthermore, we find that high attention is related to a stronger tendency to sell moderate losses, as compared to large ones, while low attention increases an investor's likelihood to sell extreme, rather than moderate, profits. These results are in line with the theory of cognitive dissonance and saliency effects.

Keywords: Investor Behavior, Disposition Effect, Attention Allocation

JEL Classification: G11, G41

Suggested Citation

Dierick, Nicolas and Heyman, Dries and Inghelbrecht, Koen and Stieperaere, Hannes, Financial Attention and the Disposition Effect (April 16, 2019). Journal of Economic Behavior and Organization, Vol. 163, 190-217, Available at SSRN: https://ssrn.com/abstract=3141219 or http://dx.doi.org/10.2139/ssrn.3141219

Nicolas Dierick (Contact Author)

Ghent University - Department of Economics ( email )

Sint Pietersplein 5
Ghent, 9000
Belgium

HOME PAGE: http://https://sites.google.com/view/nicolasdierick/home

Dries Heyman

Ghent University - Department of Financial Economics ( email )

Ghent, 9000
Belgium
0032 (0)9 2645307 (Phone)
(0)9 2643577 (Fax)

Koen Inghelbrecht

Ghent University - Department of Economics ( email )

Sint-Pietersplein 5
Ghent, B-9000
Belgium
+32 9 264 89 77 (Phone)

HOME PAGE: http://users.ugent.be/~kjinghel/

Hannes Stieperaere

Ghent University - Department of Financial Economics ( email )

Ghent, 9000
Belgium

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